 | | Dr. Hugh Doherty |
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Power Thought: Doctor's Financial Network
NFL players and dentists make the same kinds of financial mistakes regular people make. They live beyond their means, become victims of Ponzi schemes and make risky investments. What comes to mind for me is that the money mistakes of five current and former NFL players are similar to what happened to some of my client doctors prior to seeking my services. Believe me when I tell you that the same money traps" are still out there, that can cause unsuspecting doctors much financial pain and anguish if you don't learn how to avoid them.. Read on .. what you can learn from them will be beneficial. Hall of Fame quarterback John Elway often escaped trouble on the field. But in 2010, Elway and a business partner invested $15 million with a hedge-fund manager who was arrested on charges that he ran a Ponzi scheme. Elway lost $3 million. Athletes and dentists can fall victim to Ponzi schemes if they do a poor job vetting the people who are handling their investments. Athletes and dentists often think they can trust the person investing their money if he or she was recommended by someone the athlete respects. Investors have to perform their own due diligence no matter how much they trust the person who recommends an investment adviser. The National Association of Personal Financial Advisors offers a questionnaire to help investors interview potential advisers. Before signing on, an investor should also contact the adviser's other clients as a reference.Look for advisers who are known in the community and give back to the community through charities or nonprofit groups. They are usually very professional, high-integrity people. Former New Orleans Saints running back Dulymus Jenod "Deuce" McAllister had more success on the field than he did selling cars. In 2009, Nissan sued McAllister's car dealership in federal district court for the return of vehicles valued at almost $5.7 million. Soon after, the dealership filed for bankruptcy."It basically happened because of the tough economic times that we're in," McAllister said. Dentists particularly should avoid trying to build successful businesses out side of dentistry. Stay inside the profession and develop what you know best... dentistry. You should hire advisers who understand the risks of starting a business. Some athletes have their agents advise them on these issues. But they're not qualified to give financial advice. They should invest only what they can afford to lose. Private investment portfolio's should only make up about 10 percent to 15 percent of a person's investing net worth. My advice is, "You don't want to be swinging for the fences with your money, it's just not a prudent way to go about accumulating wealth." New York Jets backup quarterback Mark Brunell filed for bankruptcy protection in 2010. He owed $7.4 million. Brunell was forced to file for bankruptcy because of two failed business partnerships. These included a real estate development company called Champion LLC and a partnership that invested in 12 Whataburger restaurant franchises in the Jacksonville area. When investing in real estate or a real estate development company, everyone needs to be able to finance it for five to 10 years to give the business time to get off the ground. A good rule of thumb on any investment is to spend as much time thinking about what will happen if it fails as you do thinking about what will happen if it succeeds. In 2008, former NFL quarterback Drew Bledsoe sued UBS Securities LLC and UBS Financial Services Inc. Bledsoe invested in a startup company called Pay by Touch through UBS. Bledsoe alleged that UBS concealed the past legal troubles of the founder John P. Rogers of Pay By Touch. Pay By Touch was developing technology to allow people to use a fingerprint to pay for things with a credit card rather than having to actually swipe the card. John P. Rogers had such a detailed history of criminal and civil misconduct and tax evasion prior to his involvement with Pay By Touch that any knowledge of this would have warned investors. There are plenty of stories of companies that make a great business pitch to investors, claiming their company will be the next Google. But before you know it, the business closes down and you can't find the people who organized it. An investor's financial advisers should do a thorough job vetting startup companies seeking an investment. A key red flag is whether an adviser is being compensated for presenting an investment opportunity to his client. That's a major conflict of interest. Dallas Cowboys wide receiver Dez Bryant has been making headlines for off-field issues since college. Earlier this year, two jewelers alleged Bryant owed them more than $800,000 for jewelry, sporting event tickets and loans, according to USAToday. He settled one lawsuit, but the other is ongoing, WFAA-TV reported last month. I have spent many hours helping doctors and their spouses to avoid excessive spending and to figure out how much they can afford for housing, food, clothing, entertainment and investments. These are habits that any individual needs to get into. Every doctor, even those "flush with money" need to pay monthly costs like gas or electric bills and allocate funds toward long-term wealth management before spending cash on leisure and investing projects. Most people will be financially stronger if they live within a "Game Plan to Accumulate Wealth." LD Pankey one of the wealthiest and greatist dentist of all time, recommended to all his students "The 90-10 Rule." Live on 90% of your income, then advocated that you should "Save 10% of what you earn." 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